How a consumer proposal works, from first meeting to final payment

Start with what you are agreeing to

A consumer proposal is a formal process administered by a Licensed Insolvency Trustee, usually called an LIT. It puts an offer to creditors to repay some or all of what you owe on different terms. The Office of the Superintendent of Bankruptcy explains the process, including the five-year maximum term. An advertised payment cannot tell you whether you qualify or whether the arrangement fits your circumstances.

Think of your first task as building a decision file. It should answer three questions: what problem are you trying to solve, what obligations would remain, and what would the proposed commitment require from your household? You need those answers before a payment figure becomes meaningful.

This guide is general education. DebtHelp publishes information; it does not assess eligibility, negotiate proposals or act as a trustee.

Prepare a complete financial picture

Make one list of debts and another of assets, then gather recent income records and household bills. Include accounts that are current as well as overdue ones. Mark balances you have estimated so that an estimate does not quietly become a confirmed figure.

Add a short explanation of what changed: fewer working hours, separation, illness, rising costs, a business loss or several events together. Exact wording matters less than useful detail. A household that expects work to resume next month faces different questions from one whose income has permanently changed.

• Which payments are already late, and are there letters with deadlines?
• Which debts involve another borrower, a guarantor or property used as security?
• Are any income amounts seasonal, temporary or uncertain?
• What costs are missing from an ordinary monthly bank statement?

Take unresolved questions to the appointment. Do not wait for perfect paperwork before asking how to proceed.

Ask for the alternatives, with reasons

The OSB's assessment guidance for trustees calls for an impartial review of relevant options, including choices outside formal insolvency. Ask why a proposal is being considered and what makes the other possibilities less suitable in your situation.

Request a comparison you can understand without translating specialist language. For each option, write down the estimated payment, likely duration, important uncertainties and obligations that continue separately. Ask the trustee to distinguish a confirmed fact from an estimate dependent on more information.

A useful follow-up is: “What would have to be different for your recommendation to change?” The answer can reveal whether the main issue is income, assets, creditor acceptance or something else. It also gives you a way to revisit the decision if your circumstances change.

Test the payment against a real month

Before agreeing to an offer, put its payment into your household budget alongside housing, food, transport, care costs and any obligations the trustee says will remain. Use income you can reasonably expect, rather than the best month you remember.

Try a second version with one ordinary disruption. In a hypothetical household, a proposed $350 payment might fit a month with no extra costs, but a $300 car repair could expose a budget with no reserve. Those numbers are an illustration, not a typical proposal or an affordability test. The question is where the repair money would actually come from.

Ask about payment dates as well as amounts. A payment just before payday creates a different cash-flow problem from one just after it. Note any expected change in rent, childcare or work expenses over the proposed term, and discuss it before signing.

Understand filing and the creditor response

Under the OSB's consumer proposal overview, the trustee files the proposal and sends it to creditors. The process includes creditor consideration and, in some cases, a meeting. An initial conversation or draft offer is not the same thing as a filed proposal.

Before filing, ask for a written explanation of which payments to continue, which collection actions are affected and which debts need separate treatment. Keep instructions tied to your particular accounts. Do not act on a general website statement about stopping payments.

Ask how you will hear about the creditor response and what happens if changes are requested. If an amended payment is suggested, run the household budget again. The fact that a new amount resolves a negotiation does not establish that you can maintain it.

The OSB describes a 45-day creditor-response period and rules for requesting a meeting. Ask the trustee to explain the stages that apply to your file. The same overview identifies two required counselling sessions and serious consequences for missed payments, including deemed annulment after three missed monthly payments. Have those requirements explained before signing.

Create a routine for the life of the proposal

Make a folder for the signed terms, payment confirmations and messages from the trustee. Put required appointments and payment dates on a calendar you actually use. Ask whom to contact when a question arises and how quickly you should report a problem.

If income falls or an expense becomes unaffordable, contact the trustee promptly. Explain the amount, date and expected duration of the change. Ask what options are available before assuming a payment can be skipped or changed. Missed-payment consequences are part of the commitment you need to understand at the outset.

At completion, request confirmation that all requirements have been met and ask what records to retain. Review how the outcome appears on your credit reports. Keep a separate list of any debts or ongoing obligations that were outside the proposal so they do not disappear from your budget simply because this process has ended.